The plan (part 2)
moneyrelations :: Aug.08.2007
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I thought about “the plan” some more. As it stands, the plan is that I earmark 5% of my investment portfolio to actively manage myself and put the rest in ETFs and index mutual funds. The reason I’m doing this is because I’m obviously a n00b, and I want some sanity in my life. I know I can’t time the market but it just bugs me when I buy a stock and it goes down a week later, which unfortunately happens a lot in my case. I’m okay if tracking ETFs and index funds go down as I figure that is just par for the course.
In hind sight, as a new investor, I should not have started with penny stocks and small caps. I did not have the experience to evaluate them properly and it demands a lot more study than what I was/am able to provide. So, I’m going to stick with big stable companies. They may not be sexy and have lower potential for growth, but at least they provide me with a steady track record where I’m able to learn from their annual reports and price them properly. I’ve been reading many websites on stock valuation and crunching formulas and to be honest, from my calculations (albeit dubious), these blue-chip companies are still overpriced even with the recent selloff. Maybe that’s the power of branding.
A study reported by Forbes.com showed that according to 3-5 year-old kids, food tastes better in McDonald wrappers compared to um, the same food not wrapped in the golden arches logo. That is an impressive display of indoctrination and branding right there. So how much is branding worth? I have no clue. But I figure that with so many analysts already following these companies, they should be priced right so that gives me some degree of comfort that I’m not overpaying. I’m looking for defensive plays as with the global economy so interlinked, geographical diversification isn’t enough. I’m looking to lay a foundation of high dividend paying securities. Afterwards… eh, haven’t thought that far ahead.
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In hind sight, as a new investor, I should not have started with penny stocks and small caps. I did not have the experience to evaluate them properly and it demands a lot more study than what I was/am able to provide. So, I’m going to stick with big stable companies. They may not be sexy and have lower potential for growth, but at least they provide me with a steady track record where I’m able to learn from their annual reports and price them properly.
Boy does that sound familiar.
Welcome to value investing…Buy good established companies when they’re on sale — like a bunch of names on the TSX last week
I’ve learned my lesson… for now
I think for new investors, the deterrent for blue-chip companies is the price so they go trolling for cheap plays. Sadly, I’ve learned that this is often a more expensive mistake. I finally sold Tahera today. Good riddance.